'As Is,' Clause for Caution

Take-It-or-Leave-It Language Makes Inspections Crucial

Tracey Longo believes her home sales were speedy in part because she marketed the properties in "as is" condition. (Marvin Joseph -- The Washington Post)

By any measure, Tracey Longo has had a busy year: She has sold two houses and purchased a third.

How did Longo manage so many major transactions in so short a period of time? Two words: "as is."

Longo, who plans to move into her newly purchased Colonial house in Silver Spring soon, quickly sold two residences this year -- a rambler in Kensington that she and her sister had used for years as an investment property and a bungalow in the same town that served as Longo's home. Much of the credit goes, of course, to the area's hot real estate market, but she also believes that the sales were speedy in part because she marketed the properties in "as is" condition.

This meant that while Longo still was legally required to disclose all known defects in the two houses, buyers were on notice that she wasn't going to listen to any appeals to spend her own money renovating kitchens, updating bathrooms or replacing windows.

"I did put the words 'as is' in the homes' listings," Longo said. "I did a lot of work on these properties before putting them on the market. In the bungalow, for instance, I rehabbed it completely inside and out. I installed central air, and that's no easy feat in a three-story bungalow. Because I did all this work I didn't want to be nit-picked over little things. I didn't want a buyer, after I had already put in $30,000 to $45,000 on this house while I lived there, coming up to me and asking, 'Why is the sash on this blind not sitting correctly?' Fortunately, the market here bears as-is transactions at this point."

When Longo purchased her home in Silver Spring, she did so from a buyer who had also put the words "as is" in the listing. This never bothered her. Longo protected herself from expensive surprises by ordering a professional home inspection before sealing the sales contract.

In many real estate transactions, the inspector's report triggers a new round of negotiations over which repairs the seller is willing to make in order to bring the property into acceptable condition. With an as-is sale, however, the idea is that it's a take-it-or-leave-it proposition.

In this quick-moving home-sale market, more sellers are inserting the words "as is" in their home listings. At the same time, buyers are more willing to buy homes in as-is condition. And as long as these buyers include a contingency clause in the sales contract calling for a home inspection before the sale is complete, there is usually little problem.

"Sometimes the words 'as is' conjure up in a lot of people's mind that the place is run down, but that's not necessarily the case," said Charlie Miller, a real estate agent with the Bethesda Gateway office of Long & Foster. "Sometimes people sell a house in as-is condition because they inherited the house, or they are acting as a trustee or guardian of an estate. In those instances the house may be in wonderful shape but they just don't know enough about it to offer a warranty on it."

As an example, Miller points to a client whose aunt suffers from Alzheimer's disease and must move from her home. As the trustee, the niece is charged with selling the house. She has been to the house many times over the years, but doesn't know enough about the condition of the home's air conditioner or furnace to know how much life either of the appliances still has left. So she listed the home in as-is condition.

Legally, sellers are still required to tell buyers about defects of which they are aware, either through a detailed disclosure statement or through a disclaimer statement, allowed Virginia and Maryland but not the District.

Selling or buying a home in as-is condition, then, needn't be a gamble. People just need to take some simple steps to make sure they're not burned.

The biggest protection buyers have when considering an as-is house is the home inspection. A professional home inspector can uncover serious defects -- a roof that needs replacing, a sinking foundation, a basement that leaks -- that might cause a buyer to back out of the purchase.

The smart move is for a buyer to include a contingency clause in the sales contract stating that a sale can be broken if a home inspection uncovers serious defects. Jim Rooney, a home inspector and owner of Free State Home Inspections in Annapolis, recommends that buyers pass on a house, even if it seems like their dream home, if a seller won't agree to such a clause.